Chinese court rules against Apple
A two-year legal battle between Apple and its chip supplier, Qualcomm, reached a new level of contention Monday when Qualcomm said a Chinese court had ordered Apple to stop selling older iPhone models in China.
The court ruling is the latest turn in the two companies’ fight over Apple’s use of Qualcomm technology in iPhones. But Apple and Qualcomm disagreed on the impact the decision will have on iPhone sales in China.
Qualcomm said a Chinese court ruled Nov. 30 that Apple had infringed on two Qualcomm patents and issued a preliminary injunction that bars Apple from selling the iPhone 6S, the iPhone 6S Plus, the iPhone 7, the iPhone 7 Plus, the iPhone 8, the iPhone 8 Plus and the iPhone X in China. The ruling did not apply to Apple’s three newest iPhones: the XS, the XS Max and the XR.
Apple said, however, that it continues to sell all iPhone models in China.
“Qualcomm’s effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world,” said an Apple spokesman, Josh Rosenstock. He added
that in the Chinese court case, Qualcomm had challenged Apple on three patents it had never raised before, including one that had already been invalidated.
Late Monday in China, Apple continued to sell four of the seven iPhone models affected by the ruling — the iPhone 7 and 7 Plus and the iPhone 8 and 8 Plus — on its Chinese website, as well as its newer models.
A slowdown in iPhone sales has contributed to a roughly 25 percent slide in Apple’s share price since the company last released quarterly results on Nov. 1. The ruling also adds to developments that have worsened trade tensions between the United States and China.
“The hits keep coming,” said Tom Forte, an Apple analyst at D.A. Davidson, referring to the string of negative headlines for the company. He added that the Chinese ruling was not as worrisome as other recent news because it affected only older smartphones and could still be resolved.
It is possible that Apple would be able to sell older iPhones if they were running on newer software. But Don Rosenberg, Qualcomm’s executive vice president and general counsel, said in a statement that the court ruling wasn’t specific to the phones’ software. He said Qualcomm would ask the Chinese courts to enforce the order.
“Apple continues to benefit from our intellectual property while refusing to compensate us,” he said.
Qualcomm, which has long sold key communications chips to Apple but has been excluded from its latest models, has filed a series of patent suits in multiple countries. Those lawsuits came after Apple filed suit in early 2017 challenging Qualcomm’s practices in licensing its patents.
The ruling in China involved two Qualcomm patents. One lets consumers adjust and reformat the size and appearance of photographs. The other manages applications using a touch screen when viewing, navigating and dismissing applications, Qualcomm said.
A Qualcomm spokeswoman said Apple could ask the Fuzhou Intermediate People’s Court to reconsider its orders within 10 days of being served with them. There is no other appeal process. Apple cannot post a bond or pay a fine and continue infringing the two patents, she said.
Apple said it had filed a request for “reconsideration” with the court Monday, the first step in appealing the preliminary injunction.
Steve Mollenkopf, Qualcomm’s chief executive, has said he expects that victories in its patent cases would help persuade Apple to agree to settle the legal disputes.
Qualcomm is the largest supplier of modem chips that allow smartphones to communicate over cellular networks. More than half of its profits have historically come from patent license fees it charges to phone makers, which have in turn complained to regulatory authorities and sued Qualcomm.
Apple sued Qualcomm in January 2017, accusing it of monopolistic practices that harm Apple and the industry. The Federal Trade Commission raised similar charges in a case filed against Qualcomm the same month. Qualcomm has insisted its practices are legal.
Apple has gradually reduced its reliance on Qualcomm, turning to Intel for modem chips in its latest iPhones.